IPOs: Investments or pie in the sky

Lately, I've noticed a lot more articles about Initial Public Offerings - IPO's. This is an area of investing I really don't follow because long ago I decided the cards were stacked against me. You can only buy shares from the Sales and Underwriting group and they seemed to be talking out of two sides of their mouth. They were promising the companies that they'd get them the highest possible prices for their stock offering and at the same time telling the public that "This is the opportunity of a lifetime and you'd better get in on the ground floor!" Since I'm such a little fish in the big pond I figured they'd make me the sacrificial lamb and I'd get fleeced.

Last year at one of the Money Shows I had an opportunity to attend a session by Jon Markman and he offered some suggestions on how to make a few bucks on IPOs but I was still cautious. I don't cover them in my blog: Financial Tides because I use BarChart to follow stock and they do not analyze any stock that hasn't been trading for at least 6 months, so where would I get information on the subject?

This morning there was an article by Sara Lepro titled "As stocks keep rallying, IPOs return". She said the IPO market had tanked last year but that at the present time there were 89 new issues in the pipeline, since she said there were only 43 IPOs completed last year that got my attention.

I found the FTSE Renaissance IPO Composite Index and it's been up 35.3% YTD through August compared to only 13.0% for the S&P.

I did further research and found MSN Money Central has a whole section called IPO Center. Now I've found a source for unbiased and independent information on IPOs. I looked at some of the returns under the Performance tab and those returns looking really enticing. If small businesses can't get the money from the banks maybe I might give them a little bit of mine.

I'm considering buying a few shares that I research at the IPO Center and storing them away for a few years. How about you?

Please give me your thoughts below.

Jim Van Meerten is a full time investor and blogs on Financial Tides. He is a past winner of the MSN sponsored Strategy Lab Open and was a contributor in the 2008 Strategy Lab.